Rajesh Bindal, J. - (1.) THE following questions of law, arising out of order dated 12.5.1993 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, 'the Tribunal') in I.T.A. Nos.1211 to 1215/Chandi/1987, for the assessment years 1977 -78 to 1981 -82 have been referred for opinion of this Court: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the entire assets of the firm were taken over by the newly -formed company and thus the conditions of Section 32A(7) of the I.T. Act were fulfilled and the investment allowance granted to the firm could not be withdrawn?
(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal was right in law in holding that Section 154 of the Income Tax Act was not attracted and the matter squarely fell Under Section 155(4A) of the Act, though it was a case where the Assessing Officer had only made a wrong mention of Section 154 in his order? 2. Briefly, the facts are that the assessee was a partnership firm constituted under a partnership deed dated 1.4.1979 having five partners. With effect from 1.4.1980, the profit sharing ratio of the partners was changed and a new partnership deed was signed. Thereafter, the firm was dissolved with effect from 1.4.1981 and a new firm was constituted admitting one new partner. The business of the firm was taken over by a company constituted by the partners of the firm, namely, M/s Gupta Foundry Works (Pvt.) Ltd. The transformation took place with effect from 1.12.1981. Noticing that the new company had not taken over the business and properties of the firm in its entirety as one property had remained with one of the partner Smt. Meena Gupta, the Assessing Officer invoked jurisdiction under Section 154 of the Income Tax Act, 1961 (for short, 'the Act') on account of violation of provisions of Section 32A(7) of the Act. While dealing with the issue in proceedings initiated under Section 154 of the Act, it was observed by the Assessing Officer that during the course of assessment proceedings for the assessment year 1982 -83 it was held that the newly constituted company having not been transferred the entire business and properties of the firm, there being violation of provisions of Section 32A(7) of the Act, the investment allowance already granted to the firm deserved to be disallowed. Accordingly, vide separate orders passed for each year, under Section 154 of the Act, the investment allowance already allowed to the firm was withdrawn and addition to that extent was made in the income of the assessee. In appeals against the orders under Section 154 of the Act, the assessee failed. The Commissioner of Income Tax (Appeals) also held that a part of the immovable property having been retained by one of the partner Smt. Meena Gupta, the succession in terms of Section 32A(7) of the Act was not complete and accordingly, the investment allowance already granted was rightly withdrawn. In further appeal before the Tribunal, the assessee succeded. While accepting the appeal filed by the assessee, the Tribunal held as under:
(3.) WE have considered the rival contentions and we find that it is a case where entire assets and liabilities have been transferred from the firm to the new company. The ld. D.R has, however, invited our attention to even of assets which remained with one partner Veena Gupta. He has argued that since some property remained with the partner, it has not a case where the entire assets and liabilities could be treated to have been taken over by the new company and, therefore, the conditions laid down Under Section 32A(7) were not fulfilled. We, however, find that the asking over agreement dated 1.12.1981 was clear in terms and there is no room for any doubt that running business of the firm was taken over long with its assets and liabilities. It has also to be noted that proceedings were initiated Under Section 154, which did not appear to be the appropriate provision. The ld. Counsel was argued that Section 155(4A) could be applied because it was that sub -section which was attracted to such a situation. He has invited our attention to the order of the Tribunal dated 7.2.1992 in I.T.A. No. 342/Chandi/88 for assessment year 1982 -83 in the case of the assessee itself wherein it has been held that such a matter did not come within the ambit of Section 154. Reliance was placed on a Decision of the Hon'ble Supreme Court in the case of Volkart Brothers and Ors. (). In that case, it has been held that where the mistake was something which was to be established by a long drawn process of reasoning on points on which there may be conceivably two opinions, it could not be called to be a mistake apparent on record. It has thus been argued that the application of Section 154 was misplaced one.;